September's Best Performers

September was a great month for the market, but it was a really great month for a few select industries. Pinpointing last month's best of the best may prove to be a fruitful exercise since strength begets strength.

With that in mind, here's a closer look at some of September's best-performing groups - more of the same could be on the way as we make our way through the fourth quarter.

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Educational Services
Just shy of a 25% gain, for-profit schools posted the biggest gains last month. It's an interesting reversal of fortune, considering these school stocks were August's biggest losers.

Why the drastic change of heart? While the Department of Education's threat of pulling the plug on financial aid for students at for-profit schools is a legitimate worry, now that the dust is settling, investors may be realizing they took the ball and ran too far with it. How so? The likely intent of the selloff was to price in the worst-case scenario. The result, however, was pricing well beyond that point. Therefore, many of these names are now undervalued.

Corinthian Colleges (Nasdaq:COCO) was one of them; it's sitting on a projected P/E of 6.9. Apollo Group (Nasdaq:APOL) may be the biggest victim of overzealous selling. Though not as cheap as Corinthian on a forward-looking P/E basis, a recent Morningstar article pointed out that its current stock price reflected an expected 50% dip in earnings stemming from the DOE's proposal. Yet, with a loan repayment rate of 44% versus the Department's threshold of 45% to remain eligible for financial aid, Apollo is at very little risk - and that's assuming the DOE actually passes the new measures. (To learn more about student loan repayment, see Student Loans: Loan Repayment)

In other words, Apollo is undervalued in addition to being underestimated.

Electronics Retailers
Just a hair behind the educational stocks were the computer and electronics stores. Technically speaking, hhgregg (NYSE:HGG) gets top honors for its leading performance. Best Buy (NYSE:BBY) gets the implied nod of bullish approval though.

As we head into the busy shopping season, we can piece together two important details about the opportunity here. One, Best Buy sailed through the recession like it wasn't even happening; it didn't see a dip in annual earnings until fiscal 2009 (calendar wise, late 2008/early 2009). And even then, it was only blip - per share income moved from $3.12 to only $2.88 (a trend that reversed the next year). Two, holiday spending is expected to be up between 3.0% and 3.5% this year.

Now combine those two factors. If Best Buy can ace it when the economy is in awful shape, just think how it will do in a consumer-friendlier environment.

Home Furnishings
They're back. This group that took the bull by the horns in 2009 had fallen off the radar since May. These stocks seem to be back on top of their game again, with September's advance of 20%. The move was made for good reason - nearly all of the stores in the group look investment-worthy.

Two standouts include Pier 1 Imports (NYSE:PIR) and Kirkland's (Nasdaq:KIRK), each of which boast single-digit P/E measures on a trailing basis. Of those two though, KIRK takes the cake.

Though August was not kind to Kirkland's shares - they plunged from $16.23 to $12.15 on August 20- it's been nothing but buying again since then.

And what happened to Kirkland's that day? The plunge was caused by an earnings miss; the company earned $0.16 per shares versus the expected $0.18. It was also a penny less than the same quarter a year earlier. A reeled-in revenue outlook didn't help any either. After the initial plunge though, the market seems to have realized you don't whack a stock 25% for one disappointing quarter when it's still one of the best - and cheapest - in the bunch.

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